Full Press Release Details
Deborah Spak, (224) 948-2349
Trachtman, (224) 948-3085
BAXTER REPORTS THIRD QUARTER 2016 RESULTS AND INCREASES
FINANCIAL OUTLOOK FOR FULL-YEAR 2016
Strong Operational Performance Contributes to Margin Improvement
Quarter GAAP Earnings per Share of $0.23;
Adjusted Earnings per Share of $0.56 increased 37 percent
DEERFIELD, Ill., October 25, 2016 Baxter International Inc. (NYSE:BAX) today reported results for the third quarter of 2016,
and increased its earnings per share outlook for full-year 2016. Baxter s third quarter worldwide sales totaled $2.6 billion, an increase of 3 percent on a reported basis and 4 percent on a constant currency basis as compared to the prior-year
We are pleased with the continued strength across our core franchises as well as our improved financial
performance, both of which are reflected in our third quarter results, said Jos (Joe) E. Almeida. Given this progress, we are intensifying our focus on portfolio management and innovation to accelerate our efforts to introduce
new products and therapies.
During the quarter, Baxter reported income from continuing operations of $127 million, or $0.23 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis. These results included net
after-tax special items totaling $184 million, primarily related to business optimization initiatives, intangible asset amortization, debt extinguishment and Baxalta related spin-off costs.
BAXTER REPORTS THIRD QUARTER 2016 RESULTS Page
On an adjusted basis, excluding special items, Baxter s third quarter income from continuing operations totaled $311 million, or $0.56 per diluted share, exceeding the company s
previously-issued guidance of $0.43 to $0.45 per diluted share.
Baxter s worldwide sales totaled $2.6 billion in the
third quarter, an increase of 3 percent on a reported basis and 4 percent on a constant currency basis as compared to the prior-year period. Sales within the U.S. were $1.1 billion, advancing 6 percent, while international sales totaled $1.5
billion, representing a 1 percent increase on a reported basis, and an increase of 3 percent on a constant currency basis. Adjusting for the impact of foreign exchange, generic competition for cyclophosphamide, and 2015 PROTOPAM orders,
Baxter s sales increased 12 percent in the U.S. and rose 6 percent globally in the third quarter.
By business, Hospital
Products sales of $1.6 billion in the third quarter increased 2 percent on a reported basis and 3 percent on a constant currency basis. Adjusting for the impact of foreign exchange, cyclophosphamide and PROTOPAM, Hospital Products sales advanced 7
percent from the prior-year period. Hospital Products performance in the quarter benefited from strong sales across the portfolio, driven by increased demand and favorable pricing in the U.S. for the company s IV solutions, nutritional
therapies, pharmacy injectables and IV access administration sets. Strength internationally in the company s hospital pharmacy compounding services and cytotoxic contract manufacturing business also contributed to growth in the quarter.
BAXTER REPORTS THIRD QUARTER 2016 RESULTS Page
Baxter s Renal sales totaled $977 million in the third quarter, representing a 4 percent increase on a reported basis, and a 6 percent increase on a constant currency basis. Growth was driven by
strong sales of peritoneal dialysis products as well as increased demand globally for continuous renal replacement therapies. Contributing to growth in the quarter were the recent launches of Baxter s new Automated Peritoneal Dialysis (APD)
systems, AMIA in the U.S. and HOMECHOICE CLARIA outside the U.S. Both of these systems utilize Baxter s SHARESOURCE Connectivity Platform, which is the first and only two-way, remote patient management system for home dialysis therapy
Based on the company s strong performance in the first three quarters of the year, Baxter is raising its financial outlook for full-year 2016 including sales growth of approximately 2 percent on a
reported basis or 4 percent on a constant currency basis, and earnings from continuing operations, before special items, of $1.88 to $1.91 per diluted share for the full year. Previous guidance called for reported sales of 1 to 2 percent (or 3
to 4 percent constant currency) and earnings of $1.69 to $1.74 per diluted share.
For the fourth quarter, the company expects
sales growth of approximately 2 percent on both a reported and constant currency basis. Baxter expects earnings from continuing operations, before special items, of $0.49 to $0.52 per diluted share for the fourth quarter of 2016.
BAXTER REPORTS THIRD QUARTER 2016 RESULTS Page
The earnings per share guidance for the fourth quarter and full-year 2016 excludes $0.05 and $0.22, respectively, per diluted share of intangible asset amortization expense; an estimated $0.01and $0.07,
respectively, per diluted share of Baxalta separation-related expense activities; an estimated $0.07 and $0.51, respectively, per diluted share of business optimization charges; and $7.84 per diluted share of asset impairment, debt extinguishment
loss, product related reserve adjustments, and Baxalta retained stake gains for full-year 2016. These estimates are based on information reasonably available at the time of this release and future events or new information may result in different
actual results. Reconciling for the inclusion of these items results in GAAP earnings of $0.36 to $0.39 per diluted share for the fourth quarter of 2016, and $8.92 to $8.95 per diluted share for full-year 2016.
A webcast of Baxter s third quarter conference call for investors can be accessed live from a link on the company s website at
www.baxter.com beginning at 7:30 a.m. CDT on October 25, 2016. Please see www.baxter.com for more information regarding this and future investor events and webcasts.
Baxter provides a broad portfolio of essential renal and hospital products, including home, acute and in-center dialysis; sterile IV
solutions; infusion systems and devices; parenteral nutrition; biosurgery products and anesthetics; and pharmacy automation, software and services. The company s global footprint and the critical nature of its products and services play a key
role in expanding access to healthcare in emerging and developed countries. Baxter s employees worldwide are building upon the company s rich heritage of medical breakthroughs to advance the next generation of healthcare innovations that
enable patient care.
BAXTER REPORTS THIRD QUARTER 2016 RESULTS Page
release includes forward-looking statements concerning the company s financial results, business development activities, capital structure, cost savings initiatives, R&D pipeline including results of clinical trials and planned product
launches, and outlook for 2016. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market
acceptance of risks for new and existing products, and the impact of those products on quality or patient safety concerns; product development risks; product quality or patient safety concerns; future actions of regulatory bodies and other
governmental authorities, including the FDA and foreign counterparts; failures with respect to compliance programs; future actions of third parties, including payers; U.S. healthcare reform and other global austerity measures; pricing,
reimbursement, taxation and rebate policies of government agencies and private payers; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; global, trade and tax policies;
accurate identification of and execution on business development and R&D opportunities and realization of anticipated benefits; fluctuations in supply and demand; the availability of acceptable raw materials and component supply; the inability
to create timely production capacity or other manufacturing supply difficulties; the ability to achieve the intended results (including targeted margin improvements) associated with the separation of the biopharmaceutical and medical products
businesses; the ability to enforce owned or in-licensed patents or the patents of third parties preventing or restricting manufacture, sale or use of affected products or technology; the impact of global economic conditions; fluctuations in foreign
exchange and interest rates; any change in law concerning the taxation of income, including income earned outside the United States; actions taken by tax authorities in connection with ongoing tax audits; breaches or failures of the company s
information technology systems; loss of key employees or inability to identify and recruit new employees; the outcome of pending or future litigation; the adequacy of the company s cash flows from operations to meet its ongoing cash obligations
and fund its investment program; and other risks identified in Baxter s most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on Baxter s website. Baxter does not
undertake to update its forward-looking statements.
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended September 30,
(in millions, except per share and percentage data)
| Three Months Ended September 30, | ||||||||||||
| 2016 | 2015 | Change | ||||||||||
| NET SALES | $ 2,558 | $ 2,487 | 3% | |||||||||
| COST OF SALES | 1,487 | 1,453 | 2% | |||||||||
| GROSS MARGIN | 1,071 | 1,034 | 4% | |||||||||
| % of Net Sales | 41.9% | 41.6% | 0.3 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 726 | 794 | (9% | ) | ||||||||
| % of Net Sales | 28.4% | 31.9% | (3.5 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 159 | 148 | 7% | |||||||||
| % of Net Sales | 6.2% | 6.0% | 0.2 pts | |||||||||
| OPERATING INCOME | 186 | 92 | 102% | |||||||||
| % of Net Sales | 7.3% | 3.7% | 3.6 pts | |||||||||
| NET INTEREST EXPENSE | 14 | 34 | (59% | ) | ||||||||
| OTHER EXPENSE, NET | 44 | 91 | (52% | ) | ||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 128 | (33 | ) | NM | ||||||||
| INCOME TAX EXPENSE (BENEFIT) | 1 | (35 | ) | NM | ||||||||
| % of Income from Continuing Operations before Income Taxes | 0.8% | 106.1% | NM | |||||||||
| INCOME FROM CONTINUING OPERATIONS | 127 | 2 | NM | |||||||||
| INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX A | 3 | (1 | ) | NM | ||||||||
| NET INCOME | $ 130 | $ 1 | NM | |||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.23 | $ 0.00 | NM | |||||||||
| Diluted | $ 0.23 | $ 0.00 | NM | |||||||||
| INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.01 | $ 0.00 | NM | |||||||||
| Diluted | $ 0.01 | $ 0.00 | NM | |||||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $ 0.24 | $ 0.00 | NM | |||||||||
| Diluted | $ 0.24 | $ 0.00 | NM | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 544 | 546 | ||||||||||
| Diluted | 551 | 549 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 409 | B | $ 279 | B | 47% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 399 | B | $ 284 | B | 40% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 311 | B | $ 225 | B | 38% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 0.56 | B | $ 0.41 | B | 37% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
September 30, 2016 and 2015
Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
(in millions, except per share and percentage data)
The company s GAAP results for
the three months ended September 30, 2016 and 2015 included special items which impacted the GAAP measures as follows:
| Three Months Ended September 30, | ||||||||||||
| 2016 | 2015 | Change | ||||||||||
| Gross Margin | $ 1,071 | $ 1,034 | 4% | |||||||||
| Intangible asset amortization expense 1 | 42 | 40 | ||||||||||
| Business optimization items 2 | 35 | 32 | ||||||||||
| Baxalta separation-related costs 3 | 1 | 1 | ||||||||||
| Product-related items 4 | (18 | ) | ||||||||||
| Adjusted Gross Margin | $ 1,149 | $ 1,089 | 6% | |||||||||
| % of Net Sales | 44.9% | 43.8% | 1.1 pts | |||||||||
| Marketing and Administrative Expenses | $ 726 | $ 794 | (9% | ) | ||||||||
| Business optimization items 2 | (106 | ) | (64 | ) | ||||||||
| Baxalta separation-related costs 3 | (9 | ) | (60 | ) | ||||||||
| Adjusted Marketing and Administrative Expenses | $ 611 | $ 670 | (9% | ) | ||||||||
| % of Net Sales | 23.9% | 26.9% | (3 pts | ) | ||||||||
| Research and Development Expenses | $ 159 | $ 148 | 7% | |||||||||
| Business optimization items 2 | (30 | ) | (8 | ) | ||||||||
| Adjusted Research and Development Expenses | $ 129 | $ 140 | (8% | ) | ||||||||
| % of Net Sales | 5.0% | 5.6% | (0.6 pts | ) | ||||||||
| Operating Income | $ 186 | $ 92 | 102% | |||||||||
| Impact of special items | 223 | 187 | ||||||||||
| Adjusted Operating Income | $ 409 | $ 279 | 47% | |||||||||
| % of Net Sales | 16.0% | 11.2% | 4.8 pts | |||||||||
| Other Expense, Net | $ 44 | $ 91 | (52% | ) | ||||||||
| Loss on debt extinguishment 5 | (48 | ) | (130 | ) | ||||||||
| Adjusted Other Income, Net | $ (4 | ) | $ (39 | ) | (90% | ) | ||||||
| Pre-Tax Income (Loss) from Continuing Operations | $ 128 | $ (33 | ) | NM | ||||||||
| Impact of special items | 271 | 317 | ||||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 399 | $ 284 | 40% | |||||||||
| Income Tax Expense (Benefit) | $ 1 | $ (35 | ) | NM | ||||||||
| Impact of special items | 87 | 94 | ||||||||||
| Adjusted Income Tax Expense | $ 88 | $ 59 | 49% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 22.1% | 20.8% | 1.3 pts | |||||||||
| Income from Continuing Operations | $ 127 | $ 2 | NM | |||||||||
| Impact of special items | 184 | 223 | ||||||||||
| Adjusted Income from Continuing Operations | $ 311 | $ 225 | 38% | |||||||||
| Diluted EPS from Continuing Operations | $ 0.23 | $ 0.00 | NM | |||||||||
| Impact of special items | 0.33 | 0.41 | ||||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 0.56 | $ 0.41 | 37% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 551 | 549 |
The company s results in 2015 included a net charge of $104 million ($71 million, or $0.13 per diluted share, on an after-tax basis) related to business optimization initiatives. This included a
net charge of $92 million related to restructuring activities and Gambro integration charges of $12 million. The $92 million of net restructuring charges included net $61 million of employee termination costs, a $13 million intangible asset
impairment, and $18 million of asset and other exit costs.
The company s results in 2015 included a loss of
$130 million ($82 million, or $0.15 per diluted share, on an after-tax basis) related to the July 2015 debt tender offers.
information on the company s use of non-GAAP financial measures in this press release, please see the company s Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Nine Months Ended September 30,
(in millions, except per share and percentage data)
| Nine Months Ended September 30, | ||||||||||||
| 2016 | 2015 | Change | ||||||||||
| NET SALES | $ 7,518 | $ 7,365 | 2% | |||||||||
| COST OF SALES | 4,510 | 4,291 | 5% | |||||||||
| GROSS MARGIN | 3,008 | 3,074 | (2% | ) | ||||||||
| % of Net Sales | 40.0% | 41.7% | (1.7 pts | ) | ||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 2,076 | 2,361 | (12% | ) | ||||||||
| % of Net Sales | 27.6% | 32.1% | (4.5 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 490 | 442 | 11% | |||||||||
| % of Net Sales | 6.5% | 6.0% | 0.5 pts | |||||||||
| OPERATING INCOME | 442 | 271 | 63% | |||||||||
| % of Net Sales | 5.9% | 3.7% | 2.2 pts | |||||||||
| NET INTEREST EXPENSE | 53 | 94 | (44% | ) | ||||||||
| OTHER INCOME, NET A | (4,286 | ) | (46 | ) | NM | |||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 4,675 | 223 | NM | |||||||||
| INCOME TAX (BENEFIT) EXPENSE | (51 | ) | 13 | NM | ||||||||
| % of Income from Continuing Operations before Income Taxes | (1.1% | ) | 5.8% | (6.9 pts | ) | |||||||
| INCOME FROM CONTINUING OPERATIONS | 4,726 | 210 | NM | |||||||||
| (LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX B | (4 | ) | 553 | (101% | ) | |||||||
| NET INCOME | $ 4,722 | $ 763 | NM | |||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 8.64 | $ 0.39 | NM | |||||||||
| Diluted | $ 8.56 | $ 0.38 | NM | |||||||||
| (LOSS) INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | ($ 0.01 | ) | $ 1.01 | NM | ||||||||
| Diluted | ($ 0.01 | ) | $ 1.01 | NM | ||||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $ 8.63 | $ 1.40 | NM | |||||||||
| Diluted | $ 8.55 | $ 1.39 | NM | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 547 | 544 | ||||||||||
| Diluted | 552 | 548 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 976 | C | $ 614 | C | 59% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 967 | C | $ 644 | C | 50% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 766 | C | $ 519 | C | 48% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 1.39 | C | $ 0.95 | C | 46% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
September 30, 2016 and 2015
Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
(in millions, except per share and percentage data)
The company s GAAP results for
the nine months ended September 30, 2016 and 2015 included special items which impacted the GAAP measures as follows:
| Nine Months Ended September 30, | ||||||||||||
| 2016 | 2015 | Change | ||||||||||
| Gross Margin | $ 3,008 | $ 3,074 | (2% | ) | ||||||||
| Intangible asset amortization expense 1 | 124 | 120 | ||||||||||
| Business optimization items 2 | 113 | 28 | ||||||||||
| Intangible asset impairment 3 | 51 | |||||||||||
| Baxalta separation-related costs 4 | 1 | 1 | ||||||||||
| Product-related items 5 | (12 | ) | (18 | ) | ||||||||
| Adjusted Gross Margin | $ 3,285 | $ 3,205 | 2% | |||||||||
| % of Net Sales | 43.7% | 43.5% | 0.2 pts | |||||||||
| Marketing and Administrative Expenses | $ 2,076 | $ 2,361 | (12% | ) | ||||||||
| Business optimization items 2 | (137 | ) | (113 | ) | ||||||||
| Baxalta separation-related costs 4 | (45 | ) | (88 | ) | ||||||||
| Adjusted Marketing and Administrative Expenses | $ 1,894 | $ 2,160 | (12% | ) | ||||||||
| % of Net Sales | 25.2% | 29.3% | (4.1 pts | ) | ||||||||
| Research and Development Expenses | $ 490 | $ 442 | 11% | |||||||||
| Business optimization items 2 | (75 | ) | (11 | ) | ||||||||
| Adjusted Research and Development Expenses | $ 415 | $ 431 | (4% | ) | ||||||||
| % of Net Sales | 5.5% | 5.9% | (0.4 pts | ) | ||||||||
| Operating Income | $ 442 | $ 271 | 63% | |||||||||
| Impact of special items | 534 | 343 | ||||||||||
| Adjusted Operating Income | $ 976 | $ 614 | 59% | |||||||||
| % of Net Sales | 13.0% | 8.3% | 4.7 pts | |||||||||
| Other Income, Net | $ (4,286 | ) | $ (46 | ) | NM | |||||||
| Net realized gains on Retained Shares transactions 6 | 4,391 | |||||||||||
| Loss on debt extinguishment 7 | (149 | ) | (130 | ) | ||||||||
| Litigation settlement 8 | 52 | |||||||||||
| Adjusted Other Income, Net | $ (44 | ) | $ (124 | ) | (65% | ) | ||||||
| Pre-Tax Income from Continuing Operations | $ 4,675 | $ 223 | NM | |||||||||
| Impact of special items | (3,708 | ) | 421 | |||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 967 | $ 644 | 50% | |||||||||
| Income Tax (Benefit) Expense | $ (51 | ) | $ 13 | NM | ||||||||
| Impact of special items | 252 | 112 | ||||||||||
| Adjusted Income Tax Expense | $ 201 | $ 125 | 61% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 20.8% | 19.4% | 1.4 pts | |||||||||
| Income from Continuing Operations | $ 4,726 | $ 210 | NM | |||||||||
| Impact of special items | (3,960 | ) | 309 | |||||||||
| Adjusted Income from Continuing Operations | $ 766 | $ 519 | 48% | |||||||||
| Diluted EPS from Continuing Operations | $ 8.56 | $ 0.38 | NM | |||||||||
| Impact of special items | (7.17 | ) | 0.57 | |||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 1.39 | $ 0.95 | 46% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 552 | 548 |
The company s results in 2015 included a net charge of $152 million ($105 million, or $0.19 per diluted
share, on an after-tax basis) primarily related to business optimization charges. This included a net charge of $102 million related to restructuring activities and Gambro integration charges of $50 million. The $102 million of net
restructuring charges included net $71 million of employee termination costs, a $13 million intangible asset impairment, and $18 million of asset and other exit costs.
The company s results 2015 included a net
benefit of $18 million ($11 million, or $0.02 per diluted share, on an after-tax basis) primarily related to adjustments to the COLLEAGUE and SIGMA SPECTRUM infusion pump reserves.
The company s results in 2015 included a loss of $130 million ($82 million, or $0.15 per diluted share, on an after-tax basis) related to the July 2015 debt tender offers.
For more information on the company s use of
non-GAAP financial measures in this press release, please see the company s Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.
BAXTER INTERNATIONAL INC.
Periods Ending September 30, 2016 and 2015